Saturday, November 15, 2008

Recession is the best incubator for ideas, invention -- even PR came into its own during Great Depression: Harvard Business Review

The Great Depression of the 1930s has proven this beyond doubt, according to Harvard Business Reviews's Steve Prokesch.

“I discovered this recently when I stumbled across Caroline Bird’s 1966 book The Invisible Scar,” writes Prokesch.

According to the book, professional management became firmly established and functions such as marketing, public relations, and advertising came into their own.

“By some accounts, the worst of economic times -- the Great Depression—was actually a rich period of management invention,” writes Prokesch.

“I was astonished to learn how a number of enterprises outperformed competitors and actually grew during that tumultuous era by excelling in understanding and satisfying customers’ changing needs.

“The Standard Oil companies built a lasting advantage by aggressively expanding their networks of service stations. Du Pont increased its dominance by introducing nylon and other new products for consumer markets. Sears prospered -- while Montgomery Ward languished -- by coming out with innovations like low-cost refrigerators and mail-order automobile insurance and by doubling the number of its stores. And at a time when Wall Street was despised, Merrill Lynch recognized that there was an opportunity for honest brokers.

“A similar customer focus allowed entrepreneurial ventures such as Carvel and Good Humor (ice-cream retailing), Clairol (hair coloring), A.C. Nielsen (retail sales data), and Chock Full O’ Nuts (coffee shops) to beat the era’s long odds."

Here are the lesson managers can learn from the The Great Depression, according to Prokesch:

1. Test your assumptions about customer needs -- by rethinking what data you are crunching or how you are segmenting customers.

2. Manage product/service innovations for global markets — by figuring out how to design low-cost or good enough offerings for customers in emerging markets and redesign them for customers in mature economies.

3. Capitalize on the promise of strategic partnering — by mastering the intangibles crucial to making alliances work.

4. Reskill your organization — by using the down market to acquire talent important to your future and the down time to develop the talent pool you already have.

“These are areas that are underappreciated or undermanaged at many companies,” writes Prokesch. “Perhaps it will take a good recession to bring them to the fore.”


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